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Fintech on the lead again – HSBC Innovation Banking and Dealroom’s UK Innovation Update

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In their latest UK Innovation Update – Q1 2024, HSBC Innovation Banking and Dealroom revealed that fintech is back on top as the UK’s most funded startup sector.

In 2023, for the first time, the most funded sector was energy. It didn’t last too long as fintech gained back its leading position with $1.4B raised across 73 rounds in Q1 2024. Some big notable late-stage rounds contributed to this like Monzo (£340 million), Flagstone (£108 million) and PPRO (£73 million).

According to the report, cutting-edge technological sectors such as frontier technology, semiconductors, and quantum computing have experienced a surge in support, emerging as leading recipients of funding in the UK tech landscape during Q1 2024. These sectors attracted substantial investments, with startups often based in science hubs such as Cambridge and Oxford, collectively raising $314.7 million and $300 million, respectively.

Stabilisation of the VC investment levels

In Q1 2024, UK startups raised a total of $3.9 billion. There are indications that VC investment levels in the UK have stabilized after experiencing a sharp global reset starting in the second half of 2022.

UK Venture Capital by stage
Source: UK Innovation update Q1 2024, HSBC Innovation Banking and Dealroom.co

Early-stage investment during Q1 closed higher than the two previous quarters, reaching $1 billion. Investment at the breakout stage of Series B and C remains consistent while late-stage funding rounds, which significantly impact total figures, remained relatively low in number but amounted to $1.4 billion. This can be taken as a sign of a potential return of mega-rounds ($100+ million deals).

Edinburgh, Brighton and Cambridgeshire – the fastest-growing UK hubs in 2024

Although London retains its position as the top city in the UK and Europe for venture capital raised in 2024, funding is increasingly flowing to innovation centres across the country.

The report highlights that Edinburgh (406%), Brighton (209%), and Cambridgeshire (59%) have experienced substantial growth in venture capital investment this year compared to a year before. This growth can be attributed to significant funding rounds secured by a variety of companies. Examples include video game developers Build a Rocket Boy in Edinburgh, drug discovery company Enterprise Therapeutics in Brighton, and quantum computing firm Quantinuum in Cambridge.

Source: UK Innovation update Q1 2024, HSBC Innovation Banking and Dealroom.co

UK continues to lead in European VC landscape

On a global scale, the UK continues to be the primary destination for startup innovation and investment in Europe. In Q1 2024, UK startups raised nearly as much capital as their counterparts in Germany and France combined, amounting to $2.3 billion compared to $1.7 billion respectively. Moreover, the UK maintains its third position worldwide, ranking only behind the US and China, and surpassing India in terms of total investment.

As stated in the report, over half of the venture capital invested in the UK originates from international sources, underscoring its status as a premier destination for tech investment on the global stage. The majority of this investment comes from the USA, accounting for 39%, narrowly surpassing the 36% contributed by domestic UK investors. Additionally, Europe contributes 12% of the funding, with Asia following closely behind at 10%.

“This data reflects a busy start to the year for the UK innovation ecosystem – from growth in investment in established and emerging areas like fintech and quantum computing to expansion of regional tech hubs across the length and breadth the country, there is much to celebrate. We remain optimistic and excited about UK innovation in 2024 and are committed to supporting and partnering with innovators, investors and the broader ecosystem.” Simon Bumfrey, Head of Technology and Life Sciences at HSBC Innovation Banking UK

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